Nigeria’s plan to tax small businesses based on turnover rather than profit is raising concerns about whether small and informal enterprises can handle the shift, particularly in an economy where many operate on thin margins.

A turnover tax, which is charged on revenue rather than profit, may require businesses to pay tax regardless of their profitability, marking a significant shift in how small and informal enterprises experience taxation.

Under the new tax law, which empowers the finance minister to issue the framework, the regulations signed by Wale Edun outline how the system will work in practice. Businesses earning N12 million or less annually are exempt, while others in the informal sector will pay 1 percent of their turnover.

Analysts warn that the approach, designed to improve compliance and widen the tax net, may introduce new pressures for informal operators. (Business Day)